Germany coalition talks collapse

Tokyo's Nikkei was the standout performer as Asian markets rallied tracking a strong lead from Wall StreetMore

The German head of state is to hold talks on Tuesday with FDP chief Christian Lindner and Green Party leaders Simone Peter and Cem Ozdemir to establish whether there is any chance of resurrecting negotiations to forge a new three-way coalition under Chancellor Angela Merkel.

Party leader Martin Schulz reacts to failure of talks on forming new government.

President Frank-Walter Steinmeier urged them to make compromises for Germany's "well-being", amid a situation he said was unprecedented. Germany has been in a holding pattern since September's election, leading to speculation about whether it is time for Merkel to step down after 12 years.

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The breakdown of the talks seemingly leaves Germany with two options: Mrs Merkel forms a minority government, or President Steinmeier calls a new election if no government is formed.

Immigration policy was the main diving point among the parties.

The country has been plunged into its worst political crisis in years after negotiations to form the next government collapsed overnight, dealing a serious blow to Merkel and raising questions about the future of the longtime Chancellor.

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Until a government is agreed, Mrs Merkel continues as acting chancellor and her previous ministers, including the SPD ones, remain in post. Germany's president has appealed to party leaders to reconsider after the Free Democrats walked out late last night, saying there was "no basis of trust".

Either way, the setback has raised concerns about the political stability of Europe's largest economy.

Mrs Merkel had been forced to seek an alliance with an unlikely group of parties after September's elections left her without a majority.

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Mr Altmaier said: "We stand by our responsibility to ensure this country has a stable and reliable government".

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